NASTASSIA ARENDSE: The automotive industry is one of the sectors earmarked by the Gauteng Government for inclusive growth and job creation. We speak to
Dr David Masondo, he’s the CEO of the Automotive Industry Development Centre. David, thank you so much for your time. Before we get started on what’s been happening in the sector, let’s start off by what the Automotive Industry Development Centre is.

DAVID MASONDO: The Automotive Industry Development Centre is a government-owned entity, it’s owned by the Gauteng Provincial Government, its key mandate is to do two things, one is to retain and two, to attract new investment into the automotive industry. So we do that through making sure that the automotive industry is globally competitive, there are a couple of programmes that we are running, as the AIDC, together with the automotive industry to make sure that it grows, investments are attracted and retained in the sector.

NASTASSIA ARENDSE: With regard to the automotive sector, I know you’ve been involved in it for quite some time since your appointment and, if I’m not mistaken, some of your work has to do with the automotive industry, what’s your assessment of what our sector looks like in South Africa?

DAVID MASONDO: The sector is very promising, the sector contributes 7% to the GDP and it’s contributing a lot in terms of the government revenue from a taxation point of view. It is estimated that in 2013 the sector contributed R1.2 billion to the South African Revenue Service. In terms of employment the sector employs almost 500 000 people and for the exports the total value of R115 billion. So the sector is quite good and it’s still promising to grow and government has committed to support it in different ways. As I speak now there is a process as well by the DTI, the Department of Trade and Industry, they are putting together a master plan for the automotive industry, which will run from 2020 to 2035. So there are positive things going on in the industry and government is also very committed to building it.

NASTASSIA ARENDSE: In terms of your engagements with those people involved in the sector, who probably run businesses, what is your sense in terms of what this industry needs in order to push it a little bit higher? We’re doing well and, as you mentioned, it’s promising but what can we do in order to elevate it to the next level?

DAVID MASONDO: Firstly, OEM, the original equipment manufacturers, the big companies like BMW, Nissan, Ford, Mercedes, the key thing that they consider in deciding where they invest because remember, this industry is a global industry, so every five, six, seven years they decide on where they should manufacture and assemble a particular car or model. So there are five things that they usually consider and these are things that we, as the AIDC, are working with the industry to make sure that South Africa remains very attractive in so far as influencing the investors to continue to invest in South Africa. So they consider skills, for that reason we are running a skills programme through a learning centre that we own, manage and operate as AIDC to support the automotive industry in so far as skills are concerned. The second thing that the investors consider is government incentives, so as AIDC we do administer investment incentives that are given by DTI to the automotive industry. Thirdly, the investors also consider logistics, how easy it is for them to bring in components from the US, Romania, Mexico into South Africa, and how easy for them once they have manufactured a car to export it to Europe, America and Africa, logistics are critical in that regard. As AIDC we don’t necessarily run a logistics sector, Transnet is quite critical in that regard, we work with them and we also run a supplier park in which the components manufacturers, people who manufacture components that are required in the car, we house them in our supplier park. So they manufacture the components in the buildings that we own and manage on their behalf, so they can focus on what they do best, which is to manufacture components. The investors also consider the size of the market, there is very little that we do as AIDC in so far as the market is concerned but the bigger your market is the more likely the automotive industry investors will come and invest in your country because they produce for the market, they produce in order to sell, so if your market is bigger they do come and invest in your country. So we are competing with big markets such as China, Europe, North America, Nigeria is also one of the big markets that is growing. So those are the things that we work with the industry to make sure that we remain globally competitive. We assist them in making sure that they remain here in South Africa and invest in South Africa for the growth of the economy as a whole.

NASTASSIA ARENDSE: Dr Masondo, speaking of assistance, I know that you run an incubation programme that’s there to help black entrepreneurs, tell us a little bit more about that.

DAVID MASONDO: The barriers to entry into this industry are very high, you need infrastructure for you as a new entrant to come in, you need skills, you need technology, you also need to meet certain standards according to what you are manufacturing, it has to meet the global standards because if there is anything in a Ford vehicle that goes wrong because of one part, they will say it’s Ford, they are not going to say it’s that component manufacturer. They will say it is Ford. Therefore, quality and meeting their standards are the critical factors that are required if you are going to get into this industry. So what we do as AIDC is through an incubation programme, there is one that we are running now at Ford, there is another one that we are putting together for Nissan, there are also discussions that we are having with BMW. So what we do is we screen prospective black entrepreneurs who are interested in entering the automotive industry and once we have screened them we assist them in overcoming the barriers that I have just mentioned. There are some who have already graduated from Ford, who are now manufacturing components for Ford. There are some who are in the process learning and they will be graduating very soon. So when you graduate we get someone to replace you in your position, so it’s a very good programme, the provincial government is very supportive of it and it does have a demonstrative effect in that other companies are looking at it and have seen that incubation is possible and it is doable, and it is feasible. The AIDC incubation centre serves as a good example for many of the companies in South Africa, particularly in the automotive industry.

NASTASSIA ARENDSE: What’s your work with township-based automotive entrepreneurs, do they also get integrated into this incubation programme or do you have another programme for them?

DAVID MASONDO: They are integrated, the township-based entrepreneurs in the automotive space because, as you know, many of the mechanics in townships, we call them backyard mechanics because they work within their yards, so we’ve got an incubation hub that we are running at Winterveld. So we teach the township-based mechanics, auto body sprayers and repairers by doing, so they learn by doing. So they come into the hub with whatever damaged car they need to fix and then we work with them to teach them how to repair a car, including mixing the paint, the temperature under which that paint needs to be mixed, so that the quality of the painting and the body repairing is quite solid. Any car where the body gets damaged is also likely to have a mechanical problem, so for that reason we are working to expand in so far as that area is concerned. Just to bring more entrepreneurs, into training them around fixing the mechanical damages in a car.

NASTASSIA ARENDSE: Earlier on you were talking about some of your flagship projects, what are the projects that you are most proud of since being with the AIDC?

DAVID MASONDO: Almost all of them, I just mentioned the incubation programme and the township hub that we are running at Winterveld. We also have industrial engineers who assist established automotive components manufacturers with meeting the global standard for manufacturing. So I think incubation is one of the flagship programmes that is showing that it is possible in this advanced manufacturing sector to basically bring people, who have been historically disadvantaged, into the sector. The whole thing is about their determination, the entrepreneur’s determination, and the will from the automotive industry and government to make sure that these barriers are dismantled to allow people who are interested in the industry to enter.

NASTASSIA ARENDSE: Dr Masondo, I know that we are almost through the year, what are some of your key tasks that you’ll be embarking on in the next few months?

DAVID MASONDO: We are putting together, firstly is to attempt to upscale what we are already doing on those programmes that I have just mentioned. But there is also a big programme that we putting together, it’s actually a master plan, we call it Tshwane Automotive City, the Premier has spoken about it a lot, the MEC has also spoken about it a lot. The whole programme, the Tshwane Automotive City, is aimed at supersizing the automotive activities and investment in the area of Tshwane. So there are a couple of projects that we’ll have to identify after finalising the master plan, just to make sure that the automotive industry in Tshwane grows and develops further.

NASTASSIA ARENDSE: Thank you, Dr Masondo for your time, we’ll have to leave it there.

DAVID MASONDO: Thank you so much.

NASTASSIA ARENDSE: That was Dr David Masondo, who is the CEO of the AIDC, also known as the Automotive Industry Development Centre.

AUTHOR PROFILE

Nastassia Arendse is a financial journalist based in Johannesburg. Before Moneyweb, she worked at CNBC Africa, SABC, Sky TV’s Freeview and Connect TV. She has been in broadcasting for eight years, working in television and radio. As a broadcaster and writer, she has interviewed a range of business leaders, including Barclays CEO Maria Ramos, Bidvest founder Brian Joffe and Comair CEO Erik Venter, among others.